Saturday, March 07, 2009
China's steel firms hope for ore price accord in April
Saturday, 07 March 2009
Iron ore price negotiations between Chinese steel mills and big global miners are likely to end in April since the miners are dragging their feet, hoping for demand to recover, an executive with China's second-largest steel maker said. "The miners are waiting for a positive influence on steel demand from China's four-trillion yuan stimulus plan," Liu Rujun, deputy board chairman of Hebei Iron and Steel Group, formed last year in a merger of two major steel producers, the parents of Tangshan and Handan, said.
China's steel sector is represented at the talks by Baosteel, China's largest steel mill, which is pushing for a price cut from top ore suppliers BHP Billiton, Rio Tinto and Brazil's Vale.
But Liu's expectation of an April end to the annual talks was earlier than some market participants and analysts expect.
"The steel mills will wait now for things to play out, and I don't see a settlement before June, maybe later," said Mark Pervan, senior commodities analyst at ANZ, adding that there was a wide gulf between the two parties.
"The five per cent increase that the producers flagged has created a real sticking point, especially with the mills looking for cuts of 40 to 50 per cent," he said.
Liu said he heard talk that some miners were offering discounts to Chinese steel mills in order to secure sales volume but stressed that weak demand from China, the world's top metals consumer, was a strong justification for lower term prices. "I think domestic demand will not increase hugely due to the stimulus plan," he said, adding that Chinese steel demand had started to improve but a full recovery was expected to take a long time.
An uptick in steel prices and exports at the start of this year cheered the gloomy commodity markets, with some traders seeing the chance of a return of Chinese demand thanks to the economic stimulus package.
"The recent gains in iron ore were a false dawn - a sucker's rally," said Pervan.
Executives from Baosteel and Beijing-based Shougang Iron & Steel Group, speaking on the sidelines of China's annual session of parliament, both said Chinese demand had not yet returned.
Liu was more optimistic. Chinese mills were idling five to ten per cent of their capacity, but that was a marked improvement from a 20-40 per cent production cut last October, when Chinese domestic steel prices slumped on weakened demand, he said.
Following Beijing's call for state-owned mills to buy overseas mining resources to secure supplies, Hebei Iron and Steel has held initial talks to acquire mines in Australia, the United States, India and east and southeast Asia, Liu said.
Source: Reuters
0 comments:
Post a Comment